Opinion: Conflict mineral policy hurt miners

Jonathan Cooper, special to the sun07.21.2013

A miner digs out soil which will later be filtered for traces of cassiterite, the major ore of tin, at Nyabibwe mine, in eastern Congo. Legislation passed three years ago to improve security, has put millions of Congolese out of work.

On July 1, 2010, the U.S. Congress passed the Dodd-Frank bill, a massive and complex piece of legislation which was designed to avoid a repeat of the 2008 housing bubble collapse and subsequent financial crisis. Buried in the bill’s 2,000-plus pages was Article 1502, the objective of which was considerably removed from the minutiae of credit-default swaps and mortgage finance.

Dodd-Frank Article 1502 (DF 1502) intended to prevent U.S. companies from being involved in the trade of “conflict minerals” in the Democratic Republic of Congo (DRC). As a result of strident lobbying by Hollywood celebrities and non-government agencies (NGO) like The Enough Project, Congress believed that eastern DRC’s immense mineral wealth was fuelling the civil war in that region, a war which has caused as many as five million deaths since its inception in 1998.

In the three years since its passage, DF 1502 has encouraged increased due diligence on the part of both multinationals and the DRC government. However, it has also become an object lesson in the unforeseen consequences of legislative intervention.

There is considerable evidence that, while well intended, DF 1502 has had the practical effect of putting millions of Congolese out of work, without at the same time measurably improving their security situation. To quote Prof. Laura Seay, an expert on the Congo, DF 1502 “has inadvertently and directly negatively affected up to five (million) to 12 million Congolese civilians. Many miners cannot feed their children. Their children are not in school this year because they cannot pay tuition fees. And those who are ill cannot afford medical treatment.”

In recognition of this, in May of 2013, Congress held a hearing to explore Dodd-Frank’s “unintended consequences” for DRC’s economy.

A breathtakingly beautiful region surrounding Africa’s “Great Lakes,” eastern Congo has been ravaged by an almost continuous multi-sided civil war for over 15 years. The origins and nature of the conflict are highly complex, and tied to ethnicity, the Rwandan genocide, mineral wealth, and a lack of a functioning government authority. The government army, para-governmental and “Mai-Mai” militias, Rwandan Hutu groups, the foreign armies of at least six countries, and various Congolese rebel factions have warred both over territory and over the region’s immense natural resource wealth (including gold, coltan, tin, and timber).

I had the chance to visit Goma, the largest urban centre in the region, in the fall of 2009. The scope and complexity of the conflict were reflected on the streets of this colourful, chaotic city: heavily armed soldiers from the United Nations and a wide array of DRC army and para-military groups were ubiquitous. The city’s roads, public health, and education infrastructures creak under the weight of a population that has rapidly doubled, as refugees seek to escape the almost-total lawlessness of more remote areas.

The civilian population has suffered the most from the conflict. Millions of refugees have been displaced, leading to a general economic collapse in east Congo. There have been recurring health crises, including a spike in HIV/AIDS and massive Cholera outbreaks which have killed tens of thousands. Most disturbingly, the civil war brought with it an epidemic of widespread sexual violence. The eastern DRC has been dubbed a “sexual holocaust” by many human rights organizations.

While certainly not the its sole cause, eastern DRC’s immense mineral wealth has exacerbated the conflict in the region. Various armed factions support themselves through trading conflict minerals.

DF 1502 was intended to prevent American companies from participating in this trade. How does it propose to do this?

To take one example, companies that manufacture with tin, tantalum, tungsten, and/or gold — all minerals found in the DRC, and all used in making cellphones and other electronics — must document their supply chains and perform extensive due diligence to verify the source of these inputs. Furthermore, this due diligence process must be independently verified by a third party, though the exact mechanics of this are vague.

The legislation has also caused serious negative externalities, which while probably unintentional, were also thoroughly predictable. Due to the increased costs of doing business which DF 1502 imposed, as well as ongoing ambiguity over the specific reporting measures required by the bill, many companies curtailed or ceased sourcing minerals in DRC. And, for a period of six months in 2011, the DRC’s government banned all mineral exports from eastern Congo, as it tried to adjust to the new compliance requirements.

Predictably, the smallest and most vulnerable participants in the DRC mining industry suffered the most as a result.

Artisanal miners lacked the resources to navigate the new compliance landscape and the capacity to seek diverse export markets — they simply lost their buyers. According to Seay, DF 1502 put upwards of two million Congolese miners out of work, directly impacting between five and 12 million of their dependents.

Though hard to quantify, that number is much greater when one considers services providers — like food vendors — whose market was dependent on mining activity. All of this took place in a region already plagued by 90 per cent unemployment. Furthermore, the black market mining industry — which involves both rebel groups and corrupt DRC army officers and government officials — was least affected by DF 1502 because it is most adaptable to operating outside of conventional supply chains.

In May, the U.S. Congress’ Committee on Financial Services held a hearing entitled The Unintended Consequences of Dodd-Frank’s Conflict Mineral Provisions. As the title of the hearing indicates, there is a recognition in certain quarters of the U.S. government and the academic and NGO communities that DF 1502 has had consequences which call the justification of the bill into question.

To quote from the Hearing’s memorandum: The Enough Project and Global Witness … have asserted that Section 1502’s costs are justified by the hope that it will end the conflict in the eastern DRC. Yet it is not clear that Section 1502 can reduce the conflict in the DRC. A recent United Nations report noted that non-mineral natural resources continue to finance armed groups and criminal networks in the DRC. For that reason, Section 1502 no matter how robustly implemented will not cut off funding to these groups.

The Enough Project — founded by John Prendergrast and Gayle Smith and endorsed by many celebrities, including Matt Damon and Ryan Gosling — is a high-profile human rights NGO which campaigns for an end to genocide and crimes against humanity.

On their website, they state with respect to conflict minerals that “inaction is unacceptable.” Inaction may not help you get an endorsement from George Clooney, but perhaps it should at least be considered if the consequences of action cause more harm than good. While The Enough Project continues to insist that DF 1502 is right and necessary, millions of Congolese have been deprived of their only source of income with no discernible impact on the human security situation in the eastern DRC.

Finding sustainable solutions to DRC’s challenges is a community-by-community, person-by-person process. Foreign support and cooperation — from government, NGO’s, and the private sector — is playing a role in this process, as well it should.

For example, the international community should continue to assist in the development of effective and fairly compensated local government and law enforcement, and to exert diplomatic pressure on other countries in the region to stop meddling in DRC’s affairs.

Also, various experts have advanced proposals to rationalize DF 1502. That said, we must be wary of simplistic, bureaucratically top-heavy, and photogenic “cure all” policies. They may sound nice when proclaimed to wide-eyed North American college students in multimillion dollar campus centres, but as DF 1502 has demonstrated they can in effect worsen the situation for those who actually have to live the reality on the ground.

Jonathan Cooper is vice-president of Macdonald Realty Group and has written this commentary as a concerned private citizen.

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Opinion: Conflict mineral policy hurt miners

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